O.C. Urged to Privatize, Sell Land, Cut Workers : Recovery: Private group’s tough measures please foes of any tax increase, but labor leaders raise an outcry.

A libertarian public policy foundation urged Orange County officials Wednesday to sell assets, privatize services and cut the county’s work force by 10% to hasten the recovery from bankruptcy.

The Los Angeles-based Reason Foundation also recommended slashing pay and benefits to remaining county employees by 10%, which foundation President Robert W. Poole Jr. said would help the county emerge from its financial debacle without a sales tax increase.

“The most powerful stimulus to making hard changes in government is a crisis,” Poole told an Orange County Forum luncheon in Irvine. “This is an opportunity to make fundamental changes.”

Included in the foundation’s plan are recommendations to lay off 1,815 county workers, to sell John Wayne Airport together with the airport at the El Toro Marine Corps Air Station, once the military leaves, and to privatize fire protection and paramedic service for county residents.

Poole warned that if county officials--two of whom, Supervisors Roger R. Stanton and Jim Silva, listened intently from the head table throughout the speech--do not seize the initiative, inertia will set in and make the sweeping changes he envisioned more difficult.

The foundation’s 21-page report, written by Poole and titled “Rescuing Orange County,” is expected to provide political and intellectual backbone to the tax opponents on one side of a widening split in the county over whether a tax hike should be considered as the county struggles to recover.

The report won plaudits from several opposed to a tax increase, who termed it a blueprint for a “rightsized,” leaner county government. But it drew criticism from labor groups alarmed by its recommendations for a significantly smaller county work force and for privatizing many services now provided by the county.

“This was magnificent,” enthused developer Buck Johns, a member of the conservative Lincoln Club, which paid a portion of the cost of producing the report. “Bob Poole gave us a clinical analysis of exactly the direction we need to head.”

But a spokeswoman for county workers’ largest union, the Orange County Employees Assn., said the recommendations are “not helpful” to the county’s restructuring effort.

“Government is organized to serve the people and provide quality services, and a certain quantity of service, at an affordable price,” said Linda Pierpoint, OCEA’s staff manager. “If they’re talking about cutting out more employees now, what happens to the services these people were performing?

“Cutting more employees at this point will not help,” Pierpoint said. Since the Dec. 6 bankruptcy, the county has sent layoff notices to about 150 employees. The county has called back at least 34 of the workers as part of a compromise worked out by the bankruptcy judge hearing the county’s case, but it laid off another 16 this week.

The much-anticipated speech drew more than 200 people interested in the county’s financial crisis, including Anaheim Mayor Tom Daly, former state Assemblyman Gil Ferguson of Newport Beach, and many business leaders, including Todd B. Nicholson, president of the increasingly influential Orange County Business Council.

Nicholson, whose group has said that a tax increase should not be ruled out as the county tries to dig its way out of its fiscal hole, said Poole’s presentation provided those trying to solve the crisis with a number of “provocative ideas.”

“We have always said that a tax increase should be a last resort,” Nicholson said. “The kinds of things (Poole) discussed, including downsizing, sale of assets and appropriate privatization, those elements all need to be in place before a tax increase is even considered.”

After taking political heat for suggesting that a tax hike should be considered at all, another leader of the council emphasized Wednesday that “there is no push for a tax increase” by business leaders.

Developer George Argyros said that while the group does not favor a tax increase, it believes the county must consider all options after having promised bondholders “the full faith and credit” of the county.

“What our message is, is ‘Hey, look. You have to deal with this thing to solve a $2.2-billion problem. You cannot eliminate any options, even the T-word, but that does not mean you do it,’ ” Argyros said. “You do it as a last resort. But my gosh, what do you do to the bondholders if you remove it from your vocabulary?”

All five Orange County supervisors have said they will not consider a tax increase. After Poole’s speech Wednesday, Stanton said he supported many of the concepts it contained but wanted to examine details of the report before commenting further.

“One of the most interesting things was the idea that if you immediately jump to a tax increase, you take away all the initiative to downsize county government, and that’s what we really need to be doing,” Stanton said.

Funded in part by the Lincoln Club and the Howard Jarvis Taxpayers Assn., the study by the libertarian think tank offered a variety of ways to cut the county’s budget and increase badly needed revenue. Included were short-term recommendations to raise quick cash by selling surplus land and county property now leased to others, and by selling and leasing back certain county buildings.

In the longer term, Poole said, the county should also consider selling correctional facilities and landfills, and a combined sale of John Wayne Airport and the airport portion of El Toro Marine Corps Air Station, when the latter reverts to county ownership. The sale of the airports alone could generate an estimated $250 million to $500 million, said Poole, a longtime advocate of privatization and government downsizing.

The report also recommends contracting with private companies to provide such services as jail operations, animal control, vehicle maintenance, paramedics and fire protection--ideas that would be virtually certain to meet with opposition from the county’s employee unions.

Its single most controversial proposal, however, is virtually certain to be the suggestion that the county cut its work force of about 18,000 by 10%, and reduce compensation by 10% for those who remain. The yearly savings from the two measures would amount to $173 million, or roughly the amount of the county’s immediate budget shortfall, Poole said.

Several county unions wasted no time firing back Wednesday.

The report, OCEA’s Pierpoint said, was part of “a political, self-serving diversion to talk about privatization and downsizing . . . when in fact nothing related to that actually caused the bankruptcy. What caused it was bad management and people with responsibility not paying attention to what was happening. It has nothing to do with the employees.”

The Los Angeles office of the American Federation of State, County and Municipal Employees also took issue with the report, saying it “misses the mark on what is needed to make Orange County whole again.”

“Orange County’s problem has not been too much government, but too little government oversight into activities affecting county residents,” John Wyrough, executive director of the union’s Council 36, said in a statement. Government, he said, cannot be run like a private business.

The Reason Foundation has performed consulting work for a number of state and city governments, including Chicago, Philadelphia, Indianapolis, Cleveland and New York, according to spokesman Richard Phillips. Poole is also working with congressional leaders to develop a federal privatization agenda, Phillips said.

Times staff writer Gebe Martinez contributed to this report.

* NO-SHOW AT HEARING: Suspended official Matthew Raabe sends word he is ill. A18

* FRUSTRATION GROWS: Settlement plan disappoints agencies in county pool. A18

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Proposed Budget Solution

The Los Angeles-based Reason Foundation has recommended a way out of Orange County’s budget crisis that combines payroll reductions, contracting out county services, property sales and lease-back arrangements and sales of major assets. The outlines of the foundation’s plan, dollar amounts in millions: Payroll/contracts: Potential Savings Cut 1,815 jobs, reduce remaining pay, benefits 10%: $173 Contract out all services for animal shelter, fleet maintenance, institutional food, janitorial, jail, paramedic and fire operations: $56-60 Asset Leases: Potential Revenue Existing county buildings: $67 Asset Sales: Potential Revenue Sale (and lease-back) of office, commercial buildings: $259 John Wayne Airport and portion of El Toro Marine base: $250-500 Jails: $100 Landfills: $261-522 Five largest water districts: $1,500 Nine sanitation districts: $1,000 Source: Reason Foundation